The insurance sector is expected to fly high with the opening up of FDI in the sector. Industry players expect innovation and new insurance products to come in the market, thus giving consumers a wider variety of choices. However, until now, the the $66.4 billion industry has been driven by only a handful of insurance products. BI India brings you some of the popular insurance products in the market and the reason behind their undisputed domination.
We all buy a life insurance policy the moment we get our first job. A buyer is often lured into buying a life insurance product through its tax benefits. Yashish Dahiya, co-founder of Policy Bazaar says, “Traditional policies including endowment and term plan sell more because all non-online channels in insurance companies only sell traditional plans. This is primarily because of the commissions that they would normally make by selling it.”
He further explained that traditional life insurance policies offer short term gains to the consumers which include getting a loan against their policy. “In addition to this, traditional plans offer guaranteed benefits to customers vis-a-vis equity-linked investments. The fact that investment under traditional plans is mostly made in specified government and corporate securities, makes them less risky and more suitable for people with lower-risk appetite,” adds Dahiya.
Unit Linked Insurance Product or commonly known as ULIP have recently started become popular. The new version of ULIPs that was first introduced in 2014 has been gaining popularity amongst retail investors. It offers dual benefit of life cover as well as investment.
Besides, with the onset of online distribution of ULIP, the premium charges have sharply dropped – with no charges for premium allocation, policy admission or discontinuance, except 2.25% fund management charge per annum (for the first 10 years of holding) and mortality charges. According to industry experts, at present, some of the ULIPs cost less than mutual funds.
“The flexibility extended by ULIP has been attracting significant number of investors. ULIPs provide investors an option to invest either in debt funds, equity funds or hybrid funds. Each of these funds has a different level of risk attached to it and you could choose to invest in either of these funds as per your risk appetite. It also gives investors the option to switch between funds with no tax implications whatsoever,” notes Dahiya.
Industry players believe that motor insurance is one of the most popular insurance products as it is mandatory to buy one at the time of purchase of the car. However, when compared with health insurance, the premium amount for motor insurance is relatively lower than that for health insurance. This too is also believed to have contributed in making motor insurance more popular than health in India.
Even though India still ranks low globally when it comes to health insurance, industry players have noted that this insurance product is fast gaining popularity. Market estimates suggested that health insurance is the fourth biggest insurance product, next only to motor insurance.
Natural calamities as well as unexpected damages to property has boosted this insurance product in the country. Industry players have attributed this trend to the improved awareness amongst people. “The very fact that most of the insurance companies introduced insurance plans that safeguards properties, commercial and personal assets against fire, reiterates its relevance and demand amongst people at-large,” elaborates Dahiya.